This paper provides evidence on ability peer effects in university education. Identification comes from the random assignment of students to sections. We find that students on average benefit from better-ability peers. Low-ability students, however, are harmed by high-ability peers. We introduce...

The decision to take more education is complex, and is influenced by individual ability, financial constraints, family background, preferences, etc. Such factors, normally unobserved by the researcher, introduce endogeneity and heterogeneity problems into estimating the returns to education. In...